Bone morphogenetic proteins (BMPs), members of the TGF-beta superfamily of secreted signaling molecules, have important functions in many biological contexts. They bind to specific serine/threonine kinase receptors, which transduce the signal to the nucleus through Smad proteins. The question of how BMPs can have such diverse effects while using the same canonical Smad pathway has recently come closer to an answer at the molecular level. Nuclear cofactors have been identified that cooperate with the Smads in regulating specific target genes depending on the cellular context. In addition, the pivotal role BMP signaling plays is underscored by the identification of factors that regulate members of this pathway at the cell surface, in the cytoplasm, and in the nucleus. Many of these factors are BMP-inducible and inhibit the BMP pathway, thus establishing negative feedback loops. Members of the BMP-Smad pathway can also physically interact with components of other signaling pathways to establish crosstalk. Finally, there is accumulating evidence that an alternative pathway involving MAP kinases can transduce BMP signals. The evidence and implications of these findings are discussed with an emphasis on early embryonic development of Xenopus and vertebrates.